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Good Governance And Corruption

By Lionel Bopage –

Dr Lionel Bopage

Good Governance a key challenge Sri Lanka has faced and spectacularly failed to deliver for most of its modern history. This challenge is not only about individuals, but systemic, spread across all spheres: socio-economic, political, judicial, cultural, arts and science. Most countries across the world have also suffered the scourge of corruption, some have succeeded in partially alleviating its pernicious influence; most like Sri Lanka have failed.

In December 2014, the presidential candidate Mr Maithripala Sirisena signed a Memorandum of Understanding (MOU)[1] with 49 political parties and civil society organisations. This MOU refers to four immediate tasks and additional measures that were to be initiated in the first hundred days since formation of the new government. The first measure to be initiated was:

“immediately prevent, through greater transparency and accountability, the present unprecedented large scale fraud, corruption, bribery and earning of commissions as well as the wastage of public funds; take action according to law to deal with abuses that have been committed.”

At an Anti-Corruption Summit held in London, President Sirisena assured the full commitment of the government of Sri Lanka in taking firm action against corruption. He also added that “corruption was a factor in promoting political and other forms of violence, as evidenced in Sri Lanka during the previous administration”, and that “it was the people, who acted democratically against corruption, by electing new leaders”.

Once in power, President Sirisena appointed a new Director General to the Commission on Bribery and Corruption. In the past, this commission hardly probed any bribery cases due to heavy political interference. Even under the new set up, institutional and political obstacles to effective legal action have been substantial. As evidenced by the President’s displeasure when the Commission brought ex-president’s sons, brothers, particularly the former defence secretary and top officials of the previous regime to court on corruption charges. The President declared[2] that he will have to take action, if the Bribery Commission and the two Police divisions investigating corruption were “working according to a political agenda“, and implied that these agencies were favouring the United National Party[3]. Following his allegations, the new Director General of the Commission on Bribery and Corruption tendered her resignation.

Given corruption is an international phenomenon it requires global solutions. Certain countries have financial institutions with systems designed to accept laundered black money. They are abetted by certain lawyers, accountants and their consulting companies that facilitate such corrupt transactions. It is well-known that firms of wealthy nations offer large bribes to institutions and powerful politicians in many developing countries. Information available on international financial flow indicates that “money is moving from poor to wealthy countries in ways that fundamentally undermine development”[4].

Background

Corruption and bribery undermines the rule of law, impedes development, and promotes bad governance. Therefore, in any economy the greatest threat to development is endemic corruption. Corruption-free government is believed necessary for the development of a country. Corruption is considered a major challenge to ending extreme poverty by 2030 and achieving the sustainable development goals. According to the World Bank Group, annually about $1 trillion is paid in bribes around the world. The total economic loss is estimated to be many times this.[5] In addition, empirical studies have consistently shown that the poor pay the highest percentage of their income in paying bribes. Every stolen rupee robs the poor of an equal opportunity in life (World Bank, 2016).

Corruption diverts resources towards the corrupt entities and individuals, both in the private and public sectors; and away from the critical services needed such as education, healthcare, drinking water etc. Notoriously crooked leaders continue to enjoy extravagance at the expense of those living in extreme poverty[6]. Transparency International (TI) indicates that five of the ten most corrupt countries also rank among the ten most violent countries in the world. Even in countries where there is no open conflict, the levels of inequality and poverty are extreme. Countries in Northern Europe are found to be the least corrupt. However, it does not mean they have no links to corruption elsewhere in the globe. Half of all OECD countries are found to violate their international obligations to crack down on corrupt activities of their companies abroad.[7]

For the purpose of our discussion here, the terms ‘bribery’ and ‘corruption’ are used interchangeably.

Corruption and Bribery

Corruption is generally defined as abuse of authority for personal and private gain[8]. Corruption includes both offering and taking bribes, civil servants dishonestly using their authority to influence decisions; fraud, blackmail, election bribery and illegal gambling (OTSI, 2010, 4)[9]. A bribe is “a sum of money, services etc. given or offered to somebody in return for some, often dishonest help”. A framework based on Corporate Strategic Responsibility (CSR)[10] provides an opportunity to not only curb corruption, but also benefit from managing the level of corruption. The degree of reporting on anti-corruption is a strong indicator of the quality and completeness of an entity’s efforts in addressing bribery and corruption.

According to TI, corruption can be classified as grand[11], petty[12] and political[13], ‘depending on the amounts of money lost and the sector where it occurs’. Corruption manifests itself in diverse forms, such as embezzlement through theft of public resources[14], extortion through threats and intimidations[15], promoting favouritism[16], and bribery[17] in the form of kickbacks, gratuities, pay-offs, grease money etc. Bribery is defined as “the act of promising, giving, receiving, or agreeing to receive money or some other item of value with the corrupt aim of influencing a public official in the discharge of his official duties. When money has been offered or promised in exchange for a corrupt act, the official involved need not actually accomplish that act for the offense of bribery to be complete.”[18]

The Anti-Corruption Summit held in London last May was intended to deal with major global corruption issues including secrecy in the movement of money around the financial system, fighting corruption in public contracting, health and sports.[19] Recognising the role of civil society and journalists in anti-corruption work, a commitment was made to see that governments provide them with greater protection. Despite forty countries signing up to general principles and a global declaration, with some countries making specific country commitments, many major economies did not make serious commitments like Brazil and China.

Corruption in Sri Lanka

TI has rated Sri Lanka very high in its Corruption Perception Index (CPI).[20] Successive Sri Lankan regimes including the current one, have demonstrated their disregard and/or purposeful sabotage of any effective established frameworks to fight corruption. The law enforcement mechanisms in Sri Lanka itself appear corrupt. Successive governments have come to power pledging during the elections to eradicate bribery and corruption; in spite of this, corruption has penetrated the public sector from top to bottom. Despite some media sources exposing corruption scandals at times, authorities have not even bothered to respond to the allegations. In Sri Lanka, for a citizen, resident or a visitor to get anything done, it is credibly alleged that some form of monetary inducement is essential. Nepotism and cronyism prevail in making appointments to government and state-owned institutions. Certain sources have also described the procedure for prosecution on corruption charges is mostly difficult.[21]

Corruption is endemic. Such instances include getting a child admitted to a school, for a person being investigated to be treated leniently, for getting an application processed at a reasonable time, for winning contracts, for taking part in or securing a win in certain sports, for saving life during the times of enforced disappearances, etc., the need to pay a ransom has become the common experience. For six decades, major political parties have been engaged in corrupt practices[22] and bribing voters during election times by distributing food parcels, dry rations and liquor, and more recently applications for jobs, housing and bank loans, cement bags, zinc and asbestos sheets, and sil redhi[23]. These political parties have vastly contributed to making these corrupt practices reach the Olympian heights it has now reached.

In 2014 and 2015 the situation in Sri Lanka was quite similar to the above. In 2012 the CPI for Sri Lanka was 40 out of 100, in 2014 it was 38[24], and in 2015 it was 37[25]. It ranked 91 among 177 in 2013, 85 among 175 in 2014, and 83 among 168 in 2015. Despite the marginal improvement shown during this period[26], the CPI of Sri Lanka for 2016 has worsened to 95 among 176 countries.[27]

According to recent reports there are some 750,000 court cases pending in the lower courts of the Sri Lankan judiciary. The regime or its judicial bureaucracy do not appear to be interested in taking measures to expedite these cases. Legal redress is also expensive. There are many cases of land disputes running close to half a century and suspects are held with no charges for many years under the Prevention of Terrorism Act. One can say that this is a corrupt system designed to make more money at the expense of the poor. Judicial corruption has also placed the regime in an uncomfortable situation internationally. At the UNHRC, the regime conceded that the people have lost trust and confidence in the justice system[28]. Thus the Sri Lankan regime had to agree to set up a judicial mechanism with international dimension to try serious crimes committed against humanity.

It is safe to say that corruption has become a way of life in Sri Lanka, not only at the level of politicians and bureaucrats, but also at the grassroots level. Therefore, the political will at the highest levels of government to rectify the issues has been almost non-existent. Whenever charges of corruption have been laid, more often than not the cases do not succeed. In this environment, blatant and grand scale corruption and financial crimes carried out with impunity under the previous regime, does not only continue, but has reached new heights[29] under the new dispensation[30].

Management of Corruption in Sri Lanka

If we cannot eliminate corruption given its deep entrenchment in the last six decades or so; we need to at least try and stop its exponential growth. At an individual level, there are people who at a high personal cost to themselves, do not engage in corruption. If as individuals offering and accepting bribes can be refused, and in work situations authority is not used to dishonestly influence decisions through fraud and blackmail, ultimately one could hold onto a good conscience of being ‘free of corruption’. This is an extremely difficult task given that certain professional organisations and individuals in the capitalist set up, assist those corrupt entities and individuals to hide without trace, their nefarious activities.

Bribery had been made a punishable offence in Sri Lanka under the Penal Code since 1883[31]. In 1954, the Bribery Act was enacted to contain bribery in Public Service. In 1958, the Act No.40 established the Bribery Commissioner’s Department under the Ministry of Justice, as the main body responsible for investigating corruption allegations brought to its attention and instituting proceedings. In 1994, the Act no.19 created the Commission to Investigate Allegations of Bribery or Corruption (CIABOC)[32]. It commenced its activities in December 1994, but it had no noticeable effect on the level of corruption. However, the CIABOC appears to have failed to conduct a credible and independent investigation into complaints made against it in the Supreme Court. The CIABOC was compelled to do so, when Supreme Court directed it to initiate an inquiry into one such complaint as expeditiously as possible[33].

Sri Lanka has ratified the UN Anti-Corruption Convention. It also signed the UN Convention against Transnational Organized Crime, but did not ratify it. Sri Lanka is also a signatory to the OECD-ADB Anti-Corruption Regional Plan. In February 2015, the government established the Financial Investigation Division (FCID) for investigating major financial crimes, frauds, unsolicited mega projects, major financial crimes against public property, money laundering, terrorist financing, illegal financial transactions, unlawful enrichments and offences on financial crimes against national security.

Despite, being generally considered to have adequate laws and regulations to combat corruption, the Country Report of the Bureau of Democracy, Human Rights and Labor[34] indicated that corruption exists in the executive and legislative branches of the government. When previous regimes used anti-terrorism legislation to gag debates on corruption, the governance system degenerated. Even those who were usually critical of such issues became extremely silent on the issue. Concerns were raised at the time about promoting police officers accused of bribery, corruption and fraud. Yet, when all police promotions were later revealed to had been carried out on the President’s advice everybody went silent. Overseas firms identified corruption as a constraint on foreign investment, though it was not considered a major threat to operating in the country, at least once a contract was won.

Social Bribes and Growth of Corruption

Effective anti-corruption measures such as right to information, whistle blower protection and witness protection are needed to be in place to control corruption. Recently enacted Right to Information Act remain to be tested in practice to ascertain whether it would ensure access to information to all stakeholders in a timely manner and in sufficient detail. Elimination of corruption in the public sector requires CIABOC to have adequate human and infrastructure resources, be more independent and empowered.

The causes and effects of corruption and the strategies to prevent it have been in the agenda of government policy makers for a very long time (Hoi and Lin, 2012)[35]. Historically governments have t been more powerful than business corporations, and could regulate the limits to the exploitation by corporations. However, it is a changed world now, where globalisation and corporatisation are predominant. Currently the neo-liberal urge for lower production costs to maximise profits drives the globalisation trend. So lower costs of labour, raw materials, logistics have become the prime driver. Consumerism heightened by artificially created demand underpins this neo-liberal trend. This process has swallowed up entire societies including most politicians. Those who could inject capital investments have become to govern all aspects of politics. Bribery and corruption have become one of the central tools in manipulating governments, its systems and politicians.

To elicit investment, national governments have to offer inducements to large transnational corporations such as guaranteed rates of return, viability gap financing[36], tax exemptions, free land for projects, publicly developed infrastructure and opportunities for capital gains and immunity from labour laws in Free Trade Zones (FTZ), or Special Economic Zones (SEZ). Abolition of long-term capital gains tax exempts them from paying taxes on gains they make from stock-market speculation. These demands from large transnational corporations are becoming increasingly aggressive, for instance, the demands for zero taxation in FTZs and SEZs and exemptions from paying corporate income tax for manufacturing as a whole.

Simultaneously, offering tax concessions and other perks make national governments lose their revenue. Thus, funds available for spending on public education, public health, healthcare including sanitation and rural infrastructure become less. The marginalised are increasingly compelled to seek private sources to fulfil their educational and healthcare needs. So, people start paying high prices for such services. National governments are compelled to turn to financial agencies, who are in turn funded by large transnational corporations. Those agencies start offering assistance packages conditional to carrying out structural reforms. Hence, national governments impose measures to further reduce welfare provisions and introduce a user pays system, which penalises the poor.

At the same time, business corporations and local regimes have become experts not only at manufacturing consent, but also in manipulating dissent. So, corrupt cronies donate generously to programs led by major political parties, and in turn the campaigns of such political parties receive huge ICT backing. Thus, civil society needs to become aware of this fact, and then they will be able to pre-empt efforts to derail the anti-corruption movement from within.

Conclusion

From the above discussion, it is clear that corruption is not simply a moral question – it is also political. It requires concerted attention of governments and business firms, particularly in the developed world. Successful anti-corruption efforts need to be led by the joint efforts of both private and public sectors and the public – including politicians, senior public officials, citizens, communities, and civil society organisations. For this to succeed, capable, transparent, and accountable institutions need to be developed at the national, regional and global level to build, design and implement anticorruption programs.

Corruption thrives because those who are corrupt intimidate and or deceive the general public by manipulating information. Both business corporations and governments extensively spin or frame information to manage perceptions. On many occasions, they have managed to convince the public not to question their bribery, corruption and unethical practices. Hence, educating ourselves to be vigilant is essential. When police officers ask for bribes to perform routine services, when tender boards unfairly and unethically determine the winners of government contracts, when public officials make awards favouring their friends or relatives, or when employees who are simply paid for signing on a register and hanging around idly, they must be exposed. It is an essential task for civic society.

This also requires a paradigm change in the orientation and mechanisms used for both growth and governance. This struggle needs to be directed not only against mega financial swindles like the Central Bank scam and other macro issues, but also against micro-level corruption that is all-pervasive in everyday life. This is an uphill task given the insidious way corruption has infected every layer of society and institutions both in the public and private sectors in Sri Lanka.

The working people of Sri Lanka, and civil society organisations need to undertake this responsibility. Given the circumstances, only they can gather the courage, commitment, strength and momentum to fight the aggressive policies of large business corporations. Working people have to counter corruption starting at micro level against specific corrupt and fraudulent practices at their own work places. Fighting corrupt onslaughts of capital needs to establish participative democracy at work places. Yet, this could happen only with a major qualitative social transformation. If processes are transparent and open, corrupt practices become exposed, which makes it easier to manage, control and finally eliminate it. Hence the broad people’s movement must become the backbone against corruption. The working people needs to become the most organised contingent to fight against the corrupt onslaught.

So, it becomes our responsibility to demand the confiscating of properties politicians and bureaucrats have corruptly acquired, and banning corporate lobbying. The working people needs to demand the establishment of effective anti-corruption legislation and a credible institutional mechanism to prosecute and punish the guilty. The people also needs to demand maintaining an open register of the entities that utilises black money in their business transactions using initiatives such as Double Taxation Avoidance Agreements with other states. The black money already stashed in foreign tax havens need to brought back for public investments. The black money hidden locally should be found and confiscated, and those involved in such scams including those in the bureaucracy and professional entities need to brought to justice.

To quote “Unmask the Corrupt[37]”:

Grand corruption is the abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society. It often goes unpunished. It concerns millions of victims around the world. It’s time the corrupt face the consequences for their crimes. Together we can make that happen!

[2] In addition, when the Criminal Investigation Department of the Police probed the allegations against military intelligence, several military intelligence officers were remanded regarding certain cases of disappearances and killings (including the 2010 abduction of journalist Prageeth Eknaligoda and the suspicious 2012 death of rugby player Wasim Thajudeen) that occurred during and after the final stages of the war. The Rajapaksa’s were critical of the regime for these arrests. The current President also weighed in and most of the suspects, Rajapaksas and army intelligence officials who had been in remand custody, were released from custody.

[6] For example, 70 percent of the Angolan population lives on USD 2 a day or less. One in six children dies before the age of five. More than 150,000 children die each year. However, Forbes consider that Angola’s President’s daughter, Isabel dos Santos is the richest woman not only in Angola, but also the whole of Africa.

[7] For example, Sweden is the third in the index; however, the Swedish-Finnish firm TeliaSonera is alleged to have paid millions of dollars in bribes to secure business in Uzbekistan, which comes in at 153rd in the index. At the same time, half of all OECD countries are found to violate their international obligations to crack down on bribery by their companies abroad.

[11] Acts ‘committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good’.

[12] ‘Everyday abuse of entrusted power by low- and mid-level public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies.’

[13] Manipulation of ‘policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth’.

[14] Such as state officials stealing from the public institutions where they are employed, or regime leaders stealing from the treasury. In Indonesia, when Suharto was in power, he allegedly embezzled up to $US35 billion from the country (Hodess, Robin, Tania Inowlocki, Diana Rodriguez, and Toby Wolfe, eds. 2004. Global corruption report. London: Pluto Press).

[15] When the rule of law is weak, this may be carried out by mafia groups blackmailing state officials, or certain state officials threatening to take sort of punitive action.

[16] Disposition to favour and promote the interest of one person or persons to the disregard of others having equal claims. Privatisation, exploitation of natural resources, regulations provide ample opportunities to play favourites and extract personal gains. Nepotism is another form of favouritism, for example, hiring and promotion of individuals based on family or other personal relations rather than merit. In the public sector, this may take the form of authority to hire or promote someone, thus the person abusing authority benefitting from it, although not necessarily in monetary terms (Admundsen, Inge. 2000. Corruption: Definitions and concepts. Chr. Michelsen Institute Working Paper).

[17] Individuals or organisations offering bribes to authorities who can make contracts on behalf of the state or make decisions on using public funds to influence their decisions regarding particular issues.

[21] On September 20, the government indicted former Deputy Defence Minister on charges of bribery. Allegations have been levelled against the current Secretary to the Ministry of Defence. At the time, there was no law that provides for public access and retrieval of relevant government information. However, in June 2016, the Parliament enacted the Right to Information (RTI) bill.

[32] The intent of the Act was “to provide for the establishment of a permanent commission to investigate allegations of bribery or corruption and to direct the institution of prosecutions for offences under the Bribery Act and the Declaration of Assets and Liabilities Law No.1 of 1975…“.